VinFast (NASDAQ: VFS), the automotive arm of Vietnamese billionaire Pham Nhat Vuong’s conglomerate, has emerged as a notable contender in the battery-electric vehicle (BEV) market. Vuong, who began his career in the noodle business after studying in Russia, launched VinFast in 2017. The company gained significant attention with its SPAC IPO in August 2023, briefly achieving a valuation exceeding $200 billion.
On its first trading day, VinFast shares opened at $22 and soared over 68% to close at $37.06. However, excitement quickly waned, and by October, shares fell to around $4. Despite being the top auto seller in Vietnam, VinFast’s vehicle deliveries remain modest, with 9,689 units delivered in Q1 2024, a decline from previous quarters.
To compete globally, VFS aims to penetrate the challenging U.S. market, having announced plans for a $4 billion assembly plant in North Carolina, although production has been delayed until at least 2028.
VinFast Strategy to Achieving Growth in EV
VinFast, the automotive division of Vietnamese conglomerate Vingroup, has rapidly emerged as a key player in the battery-electric vehicle (BEV) sector since its establishment in 2017. Under the leadership of billionaire Pham Nhat Vuong, VFS launched its SPAC IPO in August 2023, briefly achieving a valuation of over $200 billion. The company’s vehicle deliveries for the first half of 2024 totaled 22,348 units, reflecting a robust 101% year-over-year increase.
Focused on its home market, Vietnam, VinFast capitalizes on its dominant market share, aided by a lack of local competition and high barriers for foreign entrants. In Q2 2024, VinFast delivered 13,172 EVs, primarily driven by strong demand for the VF 5 model, which accounted for 62% of total deliveries.
Despite facing challenges in international markets, particularly the U.S., VinFast is committed to expanding its dealer network and product offerings. The company plans to launch new models, including the VF 6 and VF 9, as it seeks to establish a foothold in North America and capitalize on the growing demand for affordable electric SUVs.
Financial Performance and VinFast Focus in Q2
In Q2 2024, VinFast (NASDAQ: VFS) reported revenue of $357 million, aligning with forecasts and marking a 9% increase year-over-year and a notable 33% rise quarter-over-quarter. This growth was primarily attributed to a shift in product mix, with more affordable models contributing significantly to total deliveries. However, the company faced a gross loss of $224 million, resulting in a gross margin of -62.7%, an increase in loss compared to previous quarters due to higher inventory write-downs.
VFS has prioritized cost optimization, successfully reducing average bill of materials and production costs by 16% and 43%, respectively. Operating expenses rose 28% quarter-over-quarter, reflecting the company’s expansion into international markets. Notably, the transition to a hybrid sales model improved the efficiency of selling expenses. With a disciplined approach to capital expenditures, VinFast allocated $108 million in Q2 primarily toward manufacturing facilities and charging infrastructure.
As of June 30, 2024, the company maintained a liquidity position with $98 million in cash and unutilized credit facilities. Despite recent earnings restatements, VinFast remains committed to enhancing internal controls and ensuring transparency in its financial reporting.
Strategic Marketing Initiatives for Global Brand Awareness
VinFast (NASDAQ: VFS) is recalibrating its marketing strategies to enhance brand awareness as it scales production across various regions. In established markets like Vietnam, where the Vingroup name is well-recognized, the company leverages its existing reputation, minimizing the need for extensive marketing expenditures. With a strong foundation built over the years, VinFast emphasizes the quality and service levels it offers, allowing customer satisfaction and word-of-mouth to drive further recognition.
Conversely, in international markets, particularly the United States, VFS recognizes the necessity for increased marketing investment to establish its brand. The company aims to cultivate awareness through targeted initiatives, focusing on the quality and reliability of its vehicles. In this effort, VFS is engaging its dealer network to amplify outreach and customer engagement. By expanding its dealership presence, VFS intends to create a stronger local footprint, enhancing brand visibility and fostering customer trust. This dual approach reflects VFS commitment to adapting its marketing strategies based on regional dynamics while maintaining a unified emphasis on quality and customer satisfaction.
